Fixing California: DeMaio sees a money pit

In inflation-adjusted dollars, Californians pay more than ever, yet have less services

The never-ending debate in California politics for the last 30 years has pretty much gone something like this: Californians need to give government more money or drastic cuts in services will have to be made.

Leading voices in the two major political parties have lined up on the extremes of that debate and proceeded to tug back and forth. So after 30 years, where are we? An analysis of government spending compared to service levels provided shows both sides won — if you can call it that.

California citizens are paying more for state government than ever before, but still receiving less in services. In many key service areas, Californians are receiving less for their tax dollars than residents in other states and less than previous generations of Californians received for their tax dollars.

What’s worse, that trend is not likely to change, unless we convince Californians that simply throwing more money into a broken system will somehow produce better results. If we want better performance, we must fix the broken system first — whether that’s in education, health care, criminal justice or something as simple as filling potholes.

Take education, for example, which is the highest priority for Californians, according to state polls. Between 2000 and 2010, Californians have given an inflation-adjusted 27.4 percent increase to total education funding and between 2000 and 2012 have given an inflation-adjusted 45.8 percent average pay increase to our teachers.

Unfortunately, according to the National Center for Education Statistics, during the same period of time, student achievement fell when compared to other states. In 2000, California ranked 36th in math, but in 2011 ranked 49th. In 2002, California ranked 42nd in reading, but in 2011 ranked 49th. This past year California placed 49th in science.

Despite spending more even after adjusting for inflation, California is also left with the highest pupil-teacher ratio in the country, at 24.12 vs. the national average of 15.97. In fact, California’s ratio has actually increased in the past 10 years up from 20.5 in 2002.

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One of the biggest complaints I receive from San Diegans relates to the poor condition of our roads. Are we getting our bang-for-the-buck in stat e highway maintenance? Sadly, no.

Between 1998 and 2011, Californians have given an inflation-adjusted 66.23 percent increase in funding for state highway infrastructure, yet the condition of every category of our highways has worsened and traffic congestion has also gotten worse.

According to a 2013 Reason Foundation report, between 1989 and 2008 California spent double per mile what other states spent per mile on highway infrastructure — $5.84 million in California vs. $2.85 million nationwide. Despite spending nearly double, California had the lowest improvements in highway infrastructure of all the states.

The “pay more, get less” theme is also playing out in the correctional system. Between 2000 and 2010, Californians have given an inflation-adjusted 42.3 percent increase for prisons. In 2011, California paid the second-highest average salary in the country for correctional officers — but still boasted the highest paid individual employee with a whopping $822,302 paid to a staff psychologist that year.

Despite the massive increase in overall funding going to the correctional system, Gov. Jerry Brown in 2011 argued for and implemented “realignment” — the release of nearly 100,000 state prisoners to county jails or parole. The result? In the first six months of the program, the number of paroled sex offenders who were fugitives rose 15 percent and property and violent crimes increased in 40 of 69 of California’s largest cities — the largest increase in 20 years.

There are a few areas where Californians are paying more and getting more — but not in the way some might want.

California boasts over 500 separate state agencies as of 2013 — and maintains programs for a variety of special areas. Take, for example, the California Horse Racing Board, which regulates horse racing and betting to the tune of $11.7 million a year with its government budget.

Some government services get multiple departments assigned to them. California is the only state with two separate agencies that collect sales and income taxes — the Board of Equalization and the Franchise Tax Board. And both are bigger than the departments of revenue in any other state. A third agency — the Employment Development Department — also collects employment taxes.

Some of the biggest costs to Californians are hidden “off-budget.” Whenever a new regulation is imposed, it costs working families and small businesses to comply, money that come out of our pockets for some assumed result.

Unfortunately, California state government does not maintain a “regulatory” budget to tally up the costs of government mandates and regulations. However, we do know California has the most regulated licensing system in the country — requiring licenses for 177 occupations versus the national average of 92 occupations.

Big-government defenders argue that costs naturally increase, and so will government spending. However, when adjusted for inflation, state government still has been given more money in each major program area.

Moreover, the notion that the cost of government services will always increase each year fails to account for the multitude of private-sector service areas where costs have remained the same or even gone down in the past five, 10 or even 20 years.

If Californians are to receive better government services at a more affordable price, we must demand several changes in how state and local government operate.

First, we must demand true performance-based budgeting be used in every state and local government agency. This requires the use of clear performance measures to track service results for California taxpayers. For each program, full “cost accounting” should be used to measure and report the cost-per-unit of service. With full transparency, taxpayers can better understand what they are really getting for their money.

Second, we must recognize that regulations have a cost to Californians, who must pay for the burden of compliance. Just as we should insist on results from our tax dollars, we must also demand an accounting of costs and benefits of these regulations.

Most Californians support the notion that money paid directly to government through taxation should be limited — which is why voters have reserved the right to vote on any tax increases. Perhaps it is time to establish an annual limitation on the “regulatory burden” imposed on Californians by government, subject to increases only by a vote of the people. If such a limit were added to the state Constitution, for every new regulation imposed by legislators or bureaucrats, an older regulation would have to be replaced or reformed to save an equal amount of money.

Third, we must challenge our elected leaders from both political parties to rethink how government agencies operate, from the bottom up. In each major service area of government, the evidence is mounting that the problem is not a lack of money, the problem is broken government processes that cost too much and deliver too little.

In some cases state rules actually prohibit the use of cost-saving reforms — such as the rules prohibiting school districts from using competitive bidding to contract support services.

The past 20 years have seen a sea change in private-sector productivity through the use of new technologies, process improvements and competitive sourcing. It’s time to demand government use these same best management practices.

Fourth, even the most efficiently designed government agency will waste money if the current pay and benefit packages for government employees are maintained. That’s why we must dramatically overhaul compensation for state and local government employees — starting with the reform of unsustainable state and local pension payouts.

Instead of across-the-board salary hikes, compensation should be based on each individual employee’s performance achievements. To encourage state and local government employees to devise and implement cost-saving ideas, taxpayers should support performance-based bonuses — but only where audited and verified savings are achieved.

To get true performance improvements in California government, we must shift the political debate past what money we spend on programs to the more pressing question of how to transform how government operates.

Can we realistically do this?

Time will tell. But the last 20 years have demonstrated that the old mentality of simply throwing more money into these government agencies simply will not produce better results for Californians. At some point, Californians will simply get tired of paying more and getting less.

DeMaio is a former San Diego City Council member. He ran unsuccessfully for mayor in 2012 and is a Republican candidate for Congress in 2014.